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tv   Squawk Box  CNBC  May 21, 2012 6:00am-9:00am EDT

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i'm becky quick along with joe kernen and andrew ross sorkin. let's get you up to speed. it is likely it to be an interesting week for newly issued shares of facebook. the stock could have a tough time if morgan stanley stops supporting the stock. the firm stepped in with support after the stock fell toward its $38 ipo price. and managers could decide to get out before going under water. and managing ceo scissors the exchange is humbly embarrassed by its bungling of its debut but he said there's no indication the nasdaq delay contributed to the underwhelming performance. nasdaq's board set on saturday. the sec is investigating. greifeld spoke with maria bartiromo last night and she'll
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be joining us. and yahoo! is selling part of its stake it in ali baba. the cash infusion could appease shareholders looking for dividends, acquisitions or share repurchases. >> and now to the other morning deal news. biggest u.s. operator of dialysis clinics buying health care partners for $4.4 billion in class and talk. also this morning, a chinese conglomerate buying amc entertainment holdings for $2.6 billion. amc's headquarters will remain in kansas city and the operations expected to remain unchanged, but there could be chang changes. we'll talk more about that. and the internet search giant
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closer to completing its biggest deal ever. the deal expected to close early next week. >> g-8 leaders are meeting at camp david this weekend. u.s. called for immediate moves to boost growth, but no sign germany would soften its stance on austerity as the cure for europe's debt problems. meantime protests against the nato summit in chicago continuing into the night. they were more peaceful than earlier in the day. at least four officers were september to the hospital yesterday including one who was stabbed in the leg. and greece's leftist leader is beginning a tour today telling he wants to talk stressing he wants to stay in the euro. it first visit apbroad since his surprise rise in a may election that we had on the 6th.
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>> talk getting a lot tougher. >> not surprising that the president doesn't want a lot of us us a t austerity here. he isn't likes big government everywhere. >> i like your tie this morning. do you know whose that is? >> it's a romney tie? >> it's a romney tie. >> i think it's the maker of the rom it any -- but i think -- >> he rejected out of hand and gave it to me. anything associated -- >> no, no, with it that -- >> that vampire private equity -- >> that had nothing to do with it. it was one of those wide ties,
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do you know the -- it was '80s style. >> he is more of a thin tie guy. >> he was thinking too bad all those employees that lost their jobs when bain capital raped their countries don't need to wear ties inside they're going to a job interview. >> did you see cory booker? he's so cool. >> did you see they came out on youtube and issued a correction of sorts? that he thinks the president has done a very good job. >> they must have been all over him. >> the rnc is saying he was pushed into doing that. but there was a youtube video that came out after his meet the press performance where he criticized negative campaigning on both sides. >> i saw a "new york times" piece about joe ricketts who had the gall to bring up the 28 year relationship. but "new york times" has no no
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problems writing an entire page to the kid with the long hair. >> that was a weird story. i still don't understand exactly what happened. i don't believe you don't remember what happened in high school. but the family of the person that they were talking about said that they were problems and that they wouldn't specify. >> it was the super pac that's going to spend all its money disparaging private equity. >> i just wonder is hawaii ever really going to give the guys in arizona a copy of that. did you see is that? we need more info. but the whole birther thing, i don't know why they just don't put to rest. >> they feel like you have.
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>> did you see the stuff from the literary agent? >> oh, yes, where in his bio, back when he was at harvard said he was born in kenya on the book cover flap. >> that was at a time where that gave international cred to his -- >> like scott thompson trying to get credit as an engineer. >> there was a debate where someone said you weren't even born -- he said it doesn't matter where i was born, i'm running for senate, not president. that was his answer supposedly. i saw all this on drudge. my sources aren't necessarily all that in-dispewsable. but it's interesting. >> it is interesting. >> do you leave and -- >> i didn't go to vancouver. i went to the west coast.
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and saw beautiful stuff on the olympic peninsula. in the meantime, let's take a look at the markets. you are going to see some strong green arrows after what we saw last week. dow futures up by 55, s&p 500 up by about 5. last week stocks had their worth weekly performance of the year. the dow was down by 3.5%, the s&p was off by 4.3%. there are a lot of things that have happened including china, wen saying they're looking towards economic growth, too. and so that has a lot of people thinking that if governments around the world, g-8, china in particular, saying that it's looking for growth, that it's going to be hard to stop, that there's probably more stimulus coming on the way. also oil prices, this has been incredibly interesting trade. oil prices continue to collapse. you can see that wti crude at
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91.82. but it has come down massively over the last week. natural gas, those prices have been increasing. so we'll continue to keep an eye on this through the day. the ten year at this point, this is going to be interesting, too p .ten year yield was at historic lows sitting at 1.757%. that's an incredible number to watch. let's take a quick look at what's happening with information ex-a forex and the dollar board. 1.277 for the euro and the dollar-yen at 79.31. gold prices, major moves. time for the global markets
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reports. kelly, good morning. how are things fairing over there? >> good morning. you can actually see green behind me it for once. that's been a bit of a change after last week. you can tell the markets are trying to get risk sentiment back in here, but still not a whole lot to really tell you about. the front page says britain and france back euro bonds and of course the headlines we're getting this morning have germany reiterating its opposition. take a look at the stoxx 600 behind me. mostly green. we're up 0.3% on the day. coming back off some of the highs earlier this season wen it talking about the need for growth and maybe perhaps nudging
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the door open for more stimulus. a closer look now, weak performer consistent pattern throughout the last couple weeks, cac 40 up 0.3%. xetra dax up about 0.8% and ftse 100 up about half a percent. those haven't moved around too much this morning. take a look at what's happening in bonds. we're seeing the yield on gilts and bund which is are behind me there, gilts up to 1.86%. we reached record low of about 1.81% last week. spain and italy have come in a little, as well. spain back towards the 6.3% level. so key one to watch there. and the bund as mentioned as 1.459 and that is not a type pea temperature quick look at commodity, but you just covered these. we're seeing again a little bit
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of green here. a lot to do with potential for more stimulus coming into the market. unfortunately, not so much to do with underlying strength. back to you. >> we mentioned the facebook ipo a little earlier. there was another big story over the weekend for mark zuckerberg. he changed his status to married on facebook. he married his long time girlfriend saturday. it was a simple ceremony in the backyard of his home and came as a big surprise. the 100 and so invited guests thought they were going to a party celebrating her graduation from medical school, but, no, it was a wedding. he had his birthday on monday, the ipo on friday and then gets married on saturday. if you you remember, mr. trump was giving will him some advice
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just last tuesday to get that pre-nup. >> my advice was get rid of her entirely, but i guess he thought of another -- if you have 16 billion and you're 28, unless you want kids, but maybe i'm cynical about love. >> maybe you are. >> what i'm more cynical about is how much money are the underwriters whether to go use. >> they're not willing to put their own money in. >> they had money on do it, but they won't go beyond. >> it would come down to 38 and then say unchanged. >> it was costing a lot of money. fees are already gone. >> was it because morgan stanley and facebook decided to increase the size and bring it all the way up to 38 bucks or is it
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because of the nasdaq's problems? >> i don't think it had anything to do with the nasdaq problems. >> it wasn't always like this. the trading that was going on for the last year in the shares of facebook, the private trading. any of the big money that wanted to get in there already got in at much lower prices. this truly was passing it off to the public. and when the guys that had the big stakes decided to do -- they all said you're kidding me, 104 billion? i'm out of here. who wants to stay in at 1 on 4 billion. why would you stay with no up side. >> so my question to you is did the bankers do a good or bad job? usually we given the bankers a hard time.
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>> that's why he was smiling. he even put a tie on by then, right? it wasn't all the way up to his collar, but -- >> if the stock drops, who do you blame? >> the guys that had the stock early will say what do they care. >> and you're right, you don't want to see a massive pop at the beginning because that's not an efficient use of markets either. >> still they got 100 billion valuation for that company which is 25 times -- henry blodge it tt with the municipppet bait, t was not a 38 open at 78, open at 90. and the story is not written
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yet. it could go below 38 this week. >> so we were at dinner last night. my wife's bought shares of facebook at $42. but it they had put a limit in at i think 60 or 70 dollars. this is what retail does. thought maybe the stock will go to the moon, but a limit at i think 60 or 70 bucks. i'm just saying i think there's a lot of people out there, and i also think there's a lot of people that might come in -- thought about it over the weekend who saw that -- >> going to be interesting. anyway, coming up, a new survey this morning finds economists are more upbeat about job growth than housing. but you missed arsenio hall almost crying. beating clay aiken.
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we'll talk to the host tomorrow. >> that spoiled it for me. >> yeah, okay. that's right. i don't want to spill it. reds beat the yankees twice. 7:30 eastern tomorrow. [ male announcer ] introducing a powerful weapon in your fight against lawn weeds. ortho weed b gon max. with a new continuous spray wand. so you can kill invading weeds down to the root. without harming your lawn. guaranteed. ortho weed b gon max. uncer) without harming your lawn. most life insurance companies
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equity markets are looking quite a bit brighter this morning. right now you have the dow
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futures up by 51, s&p futures higher by about 5, a lot coming after what we heard from the g-8 and from china. china focused at this point on growth. and that means could you see a whole lot more stimulus headed this way. also home improvement retailer lowes is reporting first quarter profit of 44 crepts is share. sales also beating consensus, but the company's forecast for the fiscal year falls below the street's forecast. the company says it's maintaining a cautious view of housing. right now the bid is at 2469, but that's a little out of whack. stock closed at 2848. >> and now today's national forecast. todd santos from the weather channel. todd. >> while facebook was the big thing to watch going this to the finish of the week, alberto was the name that really took a lot of attention.
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just because the system is just about 140 miles south of hilton head, it is expected to continue off the coastline. may have some interruptions with barge traffic. beyond that the system out of there. winds right now the sustained at 40 miles per hour. really only effects for folks here at the beaches maybe risk current risks. you can see it on the radar itself with some thunderstorm activity, but really may just clip the edge of the carolinas. chance for heavy showers back toward new york and the tri-state area getting some of the showers over towards elizabeth, just in through newark, towards manhattan and actually north and east should be dry to start off, but increasing chances throughout the day. travel wise could haven amt pact wi an impact with some airlines. a new nabe survey finds economists are growing slightly
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more aoptimistic about the job and housing market. we've had ---jim, when was the last time you were on? 11 out of 12 days it's been down. you were in here again, you look smart, the market at like 13,400 and we were saying how right you had been. you get out of town and then we get 11 out of 12 days straight down. so i think this is a good sign it that you're back today. >> yeah, i don't know. i wondered why you were inviting me on after the worst week of the year but things are better when i'm nervous. >> how about now, are you nervous you now? >> to tell you the truth, i don't feel tremendously scared and that makes me nervous because maybe we have to get worse before we get better.
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i don't know. i'm liking the domestic economy. i really think that we're growing closer to 3% rather than 2.25. and i also like the odds with china working hard to rehabilitate their growth rate. i think we'll start to see evidence of the emerging world bottoming out. i think that combo package will trump europe and maybe we're setting ourselves up here, refreshing values, we're only selling a little over 12 times year end earnings. we've taken bond yields back down. >> china is struggling and you can be optimistic or pessimistic. i think china has some real
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challenges. europe is in it a real fix. europe doesn't really have a good solution. they not only don't have a consensus, if could you to whatever you wanted to do, it would be hard to do the right things without making things worse before they get better and that's the problem with europe. even if you do something, it's hard to make it better first. >> can the participation rate continue to go down which keeps the overall unemployment rate looking manageable, or it seems like sooner or later that train ends and people stop sleeving? >> the labor force is actually rising. participation rights arates are stabilizing. household report created about 850,000 jobs in february and then the last two months, we had declines. neighb but that's the household report. it's volatile. but the unemployment rate is a ratio to a very unstable things, but the continuing decline is a
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real signal and i expect that we'll continue to see job growth. >> i think it will be enough to keep bringing the unemployment rate down. i don't think it's going down fast, but we're still making progress. >> are we at 3% like jim thinks on gdp growth? >> not unless there's some tremendous stuff going on with provisions. we've had the slowest recovery sector. if you look at overall demand, it hasn't been a problem with a lack of nademand, but thdemand all been in goods. so we get very little job growth and it blunts the multi-flyer because you don't get people with income rising. but we've never seen the services sector this week. there have been no government
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policieses to try to fix this, to talk about it. >> why is that? >> it's also true consumer services. part of what it is, that if you look at the inflation rate, inflation rate has been higher than in goods. consumers are being more frugal. i think a lot of these services are attached to home owning. people have somebody clean their pool, cut their grass, and because the housing sector is weak, you you don't get the housing services. education is pretty cheap. health care is cheap. so you take came of the big things in services and you can see why that sector struggling. but it's the jobs place and the economy and it's weak. >> does this set the normal pull back which usually gets to supports us? there are support levels i guess
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down here at the s&p as we get into close to these areas. do you expect a resufrl shon again to higher highs and where we were near term? >> this year's obligatory 10% declineis decline, sell in may, go away, what we know about europe flares up, we sell off, everyone says armageddon's coming and then it rallies to new highs. we've done that five times now. and every time everyone says sell, but it turns out to be a great buying opportunity. we have some perception of -- >> 20 seconds. >> just going to say it really slows down. but i think it's doing better. >> all right. thanks. good to see both of you. coming up, we'll get a live report from the nasdaq where everyone is still trying to
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figure out what went wrong with facebook's ipo on friday. [ wind howling ]
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[ all ] shh! [ male announcer ] solutionism. the new optimism. don't do that, i don't want to have that image. i love this song. ♪ ring of fire >> good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen. asteroid. >> does the state actually sell
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to the -- or was it they proposed it? >> preparation h. they do use it, yeah. i think they probably did it. i'm joe kernen along with -- the woman -- >> yeah. >> that's the eclipse. becky's back. andrew is here. and it's an uncomfortable monday morning making headlines. i said this in the opening. side slab. side slab barclays is -- what is a side slab? >> it's sha ththat slime thing - >> why do i need to know about the side slab? >> it's not there for you just like you're not supposed to read those parts. >> in parentheses do not read? anchorman 2 is coming out. barclays is selling its stake in black rock. uk bank has held it for almost three years. i'll reveal something to you now.
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i'll reveal to you veers that t you viewers that google will offer remedies in the case and the eveu says any google proposs will be market tested. and check out these pictures, a rare ring of fire crosses the skies leaving spectacular view and a lot of pain for millions across the world. it's a problem. and in the western united states last night, during an anal -- anular eclipse, the moon passes in front of the sun leaving only a golden ring. >> i mentioned a plauparticular
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last week, that was bad. facebook eeking out only a small gain friday. first day of trading marred by trading glitches and weaker than expected demand. let's get to kayla tausche. this is tbig story of the morning. >> it is. all eyes on nasdaq today after trading execution problems led to high volatility and a rocky road for facebook's day view as a public company. but bankers aren't exactly off the hook either. because even though facebook traded record volume of 578 million shares, the stock repeatedly teetered on the brink of that $38 issue price. closing up only 23 cents. and when large waves of selling came especially in the afternoon, bankers can everything they could to keep the stock above water and their reputations intact. in any ipo, the lead underwriter creates a short position called a green shoe, a position they can cover when the stock fall twos or below that issue price.
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sources familiar with the situation said morgan stanley was dipping into that $2.4 billion pot on friday to stabilize the shares but just how much they were using remains unclear. traders were trying to get buying assume buy ing support at $38 and people saying that buying support at 38 was strong. now, that green shoe position would have allowed more investors to get in on that facebook deal and would have ranked the deal the second largest u.s. ipo ever having raised $18.4 billion. as it stands, the deal announced on friday only raised $16 billion and is the third largest in the u.s. shall downward pressure may have come from signs the deal was overhyped, but underwriters do have reasons to be furious with nasdaq even though nasdaq said its execution problems weren't the reason for the big drop in the stock. it did cause a lack of confidence and start a lot of volatility in the stock that led
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to canceled orders. and those canceled orders did lead to a lot of the back up in the trading and volumes. and it's unlikely that any of the value whether fees for underwriters, market cap or pricing the stock for investors will ever be able to be retrieved if it doesn't bounce back today. the situation is without precedent so everyone watching to see how it trades today. >> how much money do the banks still have to stabilize the stock for the rest of the week if it that's what they were planning on doing at all? >> it's really unclear how much. they did have 63 million shares that were part of this green shoe overallotment and there's been some speculation that they used about 30 million of those shares to stabilize on friday meaning if they use that much or
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more today or tomorrow, we could see more going into the trade. >> thank you so much. commodities futures trading commission has opened a probe into any wrongdoing in jpmorgan's $2 billion plus trading loss. bart, i know you recently wrote a blog about this. do you want to lay out your position for the viewers? >> good morning. and joe, with the probe and moon and everybody -- >> i knew you might mention that. >> it's dangerous being around you sometimes. isn't it. basically we've had this huge two billion loss at jpmorgan and we've started an investigation. fbi and sec has an investigation. that didn't mean anybody's done anything wrong. but for me what it says is that we've got over 300 regulations
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not just us from it the financial reform and only about a third of them are done. and this will should be a sort of cold slap in the face for us to get on with it and put the hammer down and get some of these things on the books like congress told us. it's not discretionary. we're not congress. congress mandated we do this and we should get on with it. so that's pretty much the position. >> i hear what you're saying and i did read the op-ed. but at the same time, what dodd-frank or any of the other rules or regulations have prevented something like this? >> we have a better view of what it was at the very least. it this whole area of trading over the counter products and these credit derivative productses that's been off of our radar screen completely. we don't have a view of it yet. it's a huge amount. this is part and park sell of the economic collapse. these are hundred wills of
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trillions of dollars. and what we currently look at is only like 5 trillion traded annually. so it's a huge dark market and basic thing we can do is have a look and see what it is. >> i understand your concern about the derivatives market and i degree with you. it should be more like the shine there. but my only concern is making the trade something more than it is. this was a $2 billion loss, but the bank still expected to earn roughly $4 billion for the quarter. so this is a situation where it's it actually working. this back took position, it will lose money on this that position, but will they can handle it in-house. and that maybe is a good thing that we've seen after what happened in the financial dry sis. >> it's mr. dimon's words that it was sloppy and stupid. and of course regulators want to have a look see at it even if nothing ends up being awry.
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you b but the best disinfefect tandis tra transparency. we have to stop assume thagt banks and large traders will do what is expected and know it that really sometimes they're only going to do what eye inspected. so we have to put appropriate borders on but leave room for innovation. we still have a whole lot of rules that needed to be put on the books. >> fair point. appreciate your time this morning. if you have comments, questions about anything you see here on squawk, shoot us an e-mail, coming up, why facebook failed to live will up to its hype. we'll give you you the answer.
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facebook on friday went public making the company worth an estimate $104 billion though i don't know if you can really put a price tag on watching your high school friends slowly get fatter. >> did you see mick jagger was the host this weekend. pretty funny. the company going public on friday. more fanfare than a presidential campaign stop. but the stock price didn't quite live up to the hype. joining us is stefani link of the what do you think of this mess? >> it's a mess. >> for facebook, not so much of a mess. if you're the underwriters -- >> they did their job. they got the most money that they could for their client, right? but it wasn't really that great for the end customer. >> so where do we go from here? >> the other thing also is just they priced this thing at a
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really bad time, right? i mean the market was down 4.5%. that was a horrible time to come public. >> you can't change it twons the thing's been set in motion. >> well, they can delay that if they want to, but this had a lot of knmomentum. this is such a different story priced at $38 versus priced at $31. it's a great growth story long term, but there are some question marks with zuckerberg and management and mobile monetization. all that stuff. so at $38, you took a lot of the juice away i think. >> they did their job as the underwriters. if we were here -- if we were sitting here and they priced at 3 1d and it jumped at $38, we'd be sitting here saying they left a lot of money on the table. >> their cost is a dollar. so they made money. the client -- and then you always want to have up side for
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the customer, for the retail investor. >> so let's talk about the up side if there is any. i think there are a lot of retail investor, i was talking about my wife's friend who bought some on friday, and she said it didn't go ups as much as i thought, maybe i should buy more. and i said did you you watch this $38 thing? it's being assumed by the banks. you should probably wait a couple days, at least see once the support goes away what happens. >> right. so i think that's key. that's critical. if it breaks price, there's a whole set of new problems. you go from support to having a ceiling. >> do you think there's a chance it won't break $38? >> you have to wait. >> so you're not going to say anything. and the other thing is when other companies like microsoft or google came public, you're hoping for eventually ten times your money with microsoft or
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with google. it they priced this at $104 billion. so it has to be a company signing for 200 billion. all the people that were away to buy the russian dude, the -- all these guys that are now bono, all the guys billionaire -- you saw how much elevation has. just do the math. they all kind of sucked up all of the up side that would have come on the ipos like it was almost public if you were rich enough and connected enough to get in on the early private market. >> a fascinating blog called the ultimate 1% and 99% where they talk about it being transferred to the -- >> i saw it on i think it was in the -- maybe it was the post. the post was really incendiary
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on saturday that the poor public was -- but the people that got the $38 price really wasn't the public on friday either. it's the big clients with the brokerage firm its. very few retail investors. they got screwed even worse because they got it at 42. >> i think you have to let the dust settle. >> it could certainly fall, but see where the dust settles. what if it does get back to $31. online advertising is grow building 12% over the next couple of years. and search -- social is gaining market share. so this company is going to grow a substantial amount. they're the biggest and best. >> we'll have to go this one second, but nasdaq, does this do anything to their business? if you are a company who is looking for a marketplace to go public, do you say they don't have their act together, i'm not
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going to do it? >> absolutely. a huge snafu. >> most companies won't have these kind of computer problems because you're not going to have a size. this this was a volume problem. >> but they had to get it done and they didn't. >> thanks for being here. coming up, we'll flee the set, check in on the stories that have us squawking this morning. with the spark miles card from capital one,
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facebook at $38 per share. >> this is the biggest ever retail event. we're back. we are in the chairs. i want to just go quick. i'm not a smart man, as you all know. and "usa today" -- i actually am -- i get by. >> you're a very smart man. >> i got "usa today" and i was just -- this is the mainstream media and i think they made a mistake here. they tried to figure out this 2012 election and the dynamic of who's going to vote for whom and
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they got the 99 percenters are going with obama, the upbeats with obama, the hard pressed and 27 plus 12 is how much? >> a lot. 39. >> plus ten. >> 49. >> that's obama. >> and 37 plus 14 for romney. >> 51. >> what is "usa today" saying today? they are not on board here with the msn, andrew. it's still -- there's still a big win forecast for president obama but it was 60 to 61 for months and months and months for about the past four months since the economy started to improve. >> the economy has not been doing so well the last few weeks. last week was the worst performance for the markets we've seen all year and i think people feel that immediately.
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>> let's look a intrade. >> this goes back to james carville, it's the economy, stupid. right? >> we'll see. >> it's all about what happens directly -- >> romney's at 39 and change. you're still talking 56 versus 39 and change. but then both the senate and the house -- the senate is in the low 60s and the house is in the mid 70s. so it's going to be a great -- i'm still waiting. today's a monday. i'm still waiting to see what happens to obamacare -- >> any monday. not next week, it's memorial day. >> likely sometime in june, early june. maybe mid june. >> eric schmidt, ceo of google -- not ceo. he's the chairman i think. he got an honorary degree at
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boston college over the weekend. what did he tell the students to do? do you know? >> no. >> take one hour a day and turn that thing off. basically he said you're looking at these screens too much, take your eyes off that screen and look into the eyes of a person that you love and have a conversation, a real conversation. >> good for him. i applaud. >> "60 minutes," peter teal, don't go to college. >> oh, man, stop telling people that. >> he's got a good point. >> no, you don't. >> not if you look at the unemployment rates for people who don't go to college. >> it's going to cost $250,000, you get out, don't have a job. >> don't go to a $250,000 school. go to a state school. s.
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a less than stellar debut. few investors like facebook's debut and why the nasdaq says it's embarrassed. >> and we'll have dick grasso. >> and billions in losses from a hedging strategy gone wrong. we'll ask harvey pitt why regulators are worried as the second hour of "squawk box" begins right now.
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>> good monday morning, everybody. welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. >> retailer lowe's beats estimates for the first quarter but says it is remaining cautious. and the average price for a gallon of unleaded regular is now at $3.78. prices have fallen by more than 18 cents over the last six weeks. and a $4.4 billion deal in the health care industry. davita is is baying health care partners for $4.4 billion. it's the largest operator of medical groups. and after the market turned in
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the weakest performance we saw all year last week, we do see some green airios, s&p futures up by about 7 points. >> nasdaq says the exchange is humbling embarrassed with its bungling of facebook's ipo. maria barti homo. so typically they lock the order book two minutes before the auction is to take place. but for ipos, they give investors a longer period, a chance to cancel or modify orders up until a millisecond.
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there were many more modifications and cancellations happening up until the auction takes place. it proved too much in terms of volume for the system to to handle. so we are going to go back to the system that is typically used where they lock out the book two minutes before the auction is to take place and today he says he's going to be watching o ensure that facebook trades well. he's expecting another day of historic volume numbers and he is expecting that it will go well. but he definitely was embarrassed and is doing damage control. what my sources are saying now is he's working on accommodation packages. this is where it gets tricky. we are unclear as far as how much of an expense this is going to have to be for nasdaq. he's going to have to make those
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investors whole who lost money because all the cancellation and modificati modifications. >> he indicate how he would have to pay those investors back? >> at this point i think he's going through all of it and trying to figure out what the number is. nasdaq has put away $20 million, which is relative a small number for infans like this. i suspect it's going to be much more than that. he's in the process of coming out of the acome bags pacommoda packages. he's trying to figure out how much nasdaq is going to have to swallow. this is also going to have to be approved by the securities and exchange commission. but that period, that time that he allowed that, nasdaq allowed investors to come back, change their orders, modify their
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orders was just too much in terms of volume that stopped trade 570 million shares on friday. that's why confirmation orders didn't go out and he's going to have to go back and look at how much this is going to cost. he does not know and does not have a number as to how much this is going to cost accommodation packages. that's what the big crux for nasdaq is, as well as being embarrassed that the trading really was bungled. >> we'll have more on "closing bell" later this afternoon. we'll keep our eyes all over that. >> let's go to dick grasso and talk about what happened. i hear you over here sort of chuckling and chortling. >> no, he wasn't.
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he was listening intently. >> there was a period in the last month or so where everyone was questioning whether it was going to open 100% above its ipo price, 80%, 60%. so you could expect the kind of systemic traffic that nasdaq experienced. look, markets have technical glitches. there's no way of getting around it. we had our own, marlborough friday was a very famous one back many years ago. it can happen to any market essentially. >> the first thing you just said was they should have expected a lot of volume. >> well, i think that the underwriters and nasdaq, as they look back at what happened, could have gotten together and said, look, for today only we're going to go to a model that represents a new york sort of single pricing model. i'm not jumping on anyone's
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bones here, joseph. i'm trying to look at that time from an invest point of view. andrew made the comment earlier in the show about his dinner guest placing limit orders to buy the stock as high as $70 per share. what maria was saying is given the anticipated pop, you had hundreds of thousands of orders that got cancelled and replaced with lower limits. you had a systemic traffic that i'm sure nasdaq has never experienced. so what they should have done, okay, and it's easy to quarterback on monday morning. what they could have done is say for friday only we're going to take a model that says there's going to be one point of pricing, we're going to collect all of the order, we're going to disseminate the parameters within which we expect this stock to open, we're going to give it a period of time to gestate into the marketplace, do it one more time if you have to
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and create a single point of happening. i don't solely fault nasdaq. everyone has a stake in this, but markets as a whole because the public has been disappointed here. one of the most telling examples that we saw out of the experience of 1987 is when you don't produce reports, confirmations of execution, investors start reentering orders at different prices and you don't know where they are. >> i got a question. >> hold on. you having been in this business a long time and also you've talked to people, how much did the underwriters spend of their gun powder? how much did they use holding it at 38 on friday? have you heard? >> well, you're speculating and i don't want to speculate. they don't -- >> you don't talk to anyone? >> no, i do talk to people. >> how long can they hold at 38?
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>> it's reasonable to expect the whole world is expecting it to break 38, which means the trend followers are going to sit on the stock until it breaks 38. >> that's what i mean. that's what i told stephanie. she goes, oh, i don't know. >> but the reality is they could be easily disappointed. it could break 38 or touch 38 as you saw it happen on friday and spike right back to 42. >> so you don't know how much morgan stanley -- they won't spend any of their own money. will they go all the way down to where they didn't make a dime on the underwriting fee? >> if i were morgan stanley, given the importance of this offering to their franchise, i'd spend every nickel i earned. >> what about beyond that? >> you know what, i'd make a decision, just as nasdaq is going to have to make a decision how much of their money they're going to put on the line. morgan stanley should say to themselves how much are we
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willing to spend? this is a franchise threatening event. let us put ourselves on the line here. >> we were debating this issue this morning about the role of the underwriter. is the role of the underwriter to get the top, tippy top price for their client, in this case facebook, or is the role of the underwriter to get as a very senior executive whose name you know, i won't say it aloud is to get the top price in a liquid market that does not always mean the top, tom price. >> they're going to say get the top price we can. if you talk to the distribution side of the house, they're going to say if that stock opens at 60 and we priced it at 38, people are going to be screaming that facebook has left something on the table. the people, your dinner partner who comes in and buys the stock
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at 60 sees the close at 38 and says i've been ripped off by my broker. could almost make the case this is the perfect pricing. >> absolutely. everyone is talking about stemming problems, whether something was left on the table. >> nothing was left on the table in this case. zion years ago this company didn't exist. it was an idea in a home room. you now have a $100 billion market cap. there are people out will there saying it's going to 50 billion. that's the beauty of the capital allocation process, you know. there is a contra side to every transaction. i think the beauty of what happened on friday, putting
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aside the systemic problem is only in america could a facebook happen. >> that's all true but still, looking what the can potentially happen, the perfect price, dick, probably would have been when you get like maybe 45. shareholders have a lot left. if you price it right, the remaining stake is worth 45. if this goes below 38 today, that didn't do anyone any favor. everyone's mad who got in on the ipo and the people who have 80% of the stock left, it could be 35. >> joe, minutes prior to the opening it was being quoted in europe 48-60 euros. this was all over the map. you've had a market for three years. >> why wouldn't it have alrea already -- a lot of the up side that russian guy got. >> 38 reflected a balance between what's happened over the
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last three years in the private market, the demand -- remember we started with the lowest pass. >> but nasdaq, the situation where greifeld is trying to figure out what he's going to pay for losses, that's a messy can of worms to open up. >> very messy. if you were at 69, you were a very unhappy participant in the market. if you were at 61, you were throwing a parade for them. i think it's important to recognize they're going to do their best here. this is an ugly situation. not everyone is going to be happy. if a community walks away elated at what you've done, you've done the wrong thing. >> joe raised the issue of this
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private market, it almost was a public company before it was a public company and how that plays into all of this. >> i can tell you from personal experience i chased a stock in the private market four years ago. >> were you an owner? >> i was not. because my history coming from markets of transparency and openness, you know, every time i tried to buy it it was offered 5d higher. so how smart am i? that was $30 before the five for one split. don't take any investment advice from the former chairman of the stock exchange. the public offering gets adjusted as to price and, as becky says, as to the size of the offering. the real test comes in the next. that tells you basically what
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happened is either kind of right or kind of work but that's not the taste, this months. can they monetize? can they achieve what everybody believes they can? that's why the market says 500 million were sold but 500 million were bought. >> well, no one we know then. >> that's a fair assessment. yogi berra. >> we talked about hindsight. we wish we could do monday morning quarterback last week. there was criticism because of all the hype but a lot of our coverage was henry blodget muppet bait coverage. a lot of people said how do you monetize this, how do you get to -- i think microsoft came wd
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781 million valuation. this would have to go to 10 trillion -- >> a trillion. >> no, it would have to go to 10 trillion to get the same up side, it would have to go to 10 trillion. >> joe, i thought your coverage was very balanced, particularly the way you talked about the gm decision? >> you were watching? >>periodically. >> remember, what people are speculating upon here is is facebook the new internet. can facebook monetize, mobile? an issue but we'll facebook the internet 3.0.
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>> dick grasso will be with us for the rest of the program. when we come back, they had a very rough start to may. and later risky trades have put regulators on alert. former sec period dick armey hit -- [ woman ] my boyfriend and i were going on vacation, so i used my citi thank you card to pick up some accessories. a new belt.
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checking the futures. we're up 60 today on the dow, that's almost a half of a percentage point. we'll take it. yahoo! is selling half of its stake in chinese e company ali baba. they have an agreement to sell the remainder of its take later on. it will appease shareholders looking for dividends, acquisitions or share repurchases. >> it means the ali baba, you're
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look at the yahoo! core being worth $4 million, 5d million total. >> i'm back to -- >> deal book. >> you think it was ipo'd for $104 billion? >> yes. no. >> if that would have been yours, you would pi about that aft after. >> given fab's evaluation. how therch plans to ortho home defense max.
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momentum this morning? >> no, i think that's high lie li dou -- highly doubtful. we don't see conditions improving to have sustainable rally until probably july. the combination of slowing growth and needing a couple of months of better data out of the asian export data, those are the numbers of the week, the flash pmis coming out of china and europe overnight wednesday and thursday morning. it's going to take a couple of -- there's been a poor reaction when the fed has ended the various stimulus projects, qe 2 and qes as long with the.
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>> though, barry, do you have the g8 oft weekend saying they are focused on growth and you also have china saying we're focused on growth, too. that could mean a lot more stimulus or a lot more fiscal and monetary policy that changes the equation a little bit. >> i would say with respect to that that, yes, on the monetary policy front as you get into june and july, you could get the fed to consider starting again we'll call it qe 3 i suppose, that's what's everyone's calling it by july, certainly not in june. the ecb is not ready to start the stimulus. they have the same moral problems with the rtos that they had with the security market program and buying sovereign debt last fall. as far as the fiscal stimulus stuff goes, there's no growth option for europe. >> there's no money.
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welcome back to squawk on this monday morning. we're going to be watching shares of facebook today, follows a less than stellar debut both in terms of the pricing and the nasdaq handling. nasdaq chairman. and protests against the nato
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summit in chicago continuing into the night. they were more peaceful than earlier in the day. at least four officers went to the hospital yesterday, including one stabbed in the leg. and another weekend at the top of the box office rankings for disney's "the avengers." it took in more than $55 million over the weekend. "battleship" came in second at 24.5 million. >> facebook setting a first day volume record for an initial public offering, shares closing at $38.23, barely above its ipo price of $38 a share. joining us is dan ackerman, senior editor and bo peabody, bo is the former ceo of tripod, a social network sold to lycos in 1998. does this remind you of what you saw last time around or is this
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a calmer environment embracing some of these network stocks? >> i think this is a little different. facebook has revenues and has profits. many of the companies that went public in the late 90s did not. at least from the market perspective, we're dealing with a different situation. >> dan, we watched what happened. as it touched 38, touched on it and got brought back up every time, people were thinking what's really happening here? was this an overextension in terms of how much of of the stock was issued? >> a week or two leading up to the ipo, i heard a lot of negative buzz from cnet readers. they said isn't facebook just a fad? they all got it into their head that it was just a fad. i think everyone kind of got almost cold feet at the last minute. >> although bo points out the point that this is a company
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with real profits. it's not the same sort of thing we saw back in the 90s. >> this definitely feels different pip heard over the last two weeks a lot of people turning negative on kind of the future of facebook. >> bo, does that make you think this is an even better position or give you reason to slow down and take a look at it? >> i think slow down. facebook is not a great advertising platform. it's a communication product not really advertising. and advertising when people are can'ting with each other has opinion historically a different thing to do. >> and once you take that mobile, it's even an harder platform. what do you think about the future for facebook? >> i think they have to figure out another way to start growing
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the average revenue per user. if you look at that metric, it hasn't grown in a year. as long as you're growing your users at such a steep pace, you can grow users. but if you're not groving the effectiveness of each user, you're going to stop growing revenue. >> at 25 times sales, you need to grow revenue. what's your margin have to be at at 25 times revenue to make money? >> you're saying thicks -- do you got enemies at the company? >> no, no, you got to grow revenue. google and facebook generate revenue from the same place. they generate it from performance-based advertising. google has never had a down revenue quarter in itstory except for one in 2009.
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obviously the financial crisis. that's because that advertising as assets continues to perform. >> no, it was a problem for facebook, ffs a problem for tripod. it will be a problem for any advertising business where the inventory does not perform the way that advertisers expect it to. >> is there any product out there, another site or series of sites, that you could conceivably see as a real competitor to facebook two, three, five years out? you look at this all the time. >> i think what's happening with pinterest is very interesting. that's a social network that's growing very quickly. it's all based on people sharing things that they're interested in through pictures.
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there's a lot of purchase intent in pinterest and i think that's what makes the inventory more valuable. >> just the idea that you can't control the message, this is kind of the wild west. and if the community doesn't like the message that you're putting out there, it can turn on you very quickly. that's just the nature of social media period. is that ultimately something that can prevent social media from growing beyond is certain point? >> i've always said that is a problem. there's two problems. one is that it's not brand safe environment, unless you're using certainly like it would be like if we put telephone, you know, advertisements into our telephone conversations. it just, did doesn't -- it's not a place where we're thinking about commercial behavior.
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>> what does up lamy do? it's one of your companies. >> it's called uplay me. >> it's funny how certain people read words one way -- >> yeah. you made a pretty good point. >> i'm not saying i'm surprised by that. >> that he made a good point? >> when the 25% overshoot, whatever it was, when that was being announced, it was simultaneous and the $38 price. it was simultaneous with what you were saying that people were -- gm and people thinking it's -- that happened at the same time. that's a bad combination when you increase the size at the same time when people are wondering -- people have always said it's not a great advertising medium.
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you don't get a quick -- if you're spending the money, you say i can post it on the internet for free. >> that's a great point. >> bo, it's dick. is that why zuckerberg proposed to pay $1 billion for instagram. >> i do think it's something they needed to do. instagram works in a different way than pinterest. in terms of solving the mobile issue, i think instagram was a pretty wise move. >> bo, we have to go but can you tell us what youplaymud.
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>> we'd love to have you back to talk about things that have worked. bo, i'd like to thank you for joining us. >> and it's great to have you on the set. >> we dance around it. i whit per it pause i teal like so? because i didn't join either and we're all afraid to say it and he said it, people are questioning whether this is a fad. who knows temperature. >> see i'm still not on it so i don't know the we'll. >> $22 been.
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welcome back to "squawk box." the futures this morning on taking a turn for the better, at least if you're a bull they are. right now dow futures up about 50 points. we'll keep an eye on that. the s&p up about 6 points. campbell soup reporting third quarter results just a few minutes ago. the food maker earned 56 cents a share, 4 cents better than the street was expecting. campbell's ceo says while overall sales trends are improving, the company is not satisfied with its performance. we'll keep an eye on that stock as well. >> and the big talker all last week was perhaps the big talker of last week.
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joining us now from d.c. is harvey pitt. it's great to see you this morning. >> good to be with you. >> i want to talk first about some of the legal issues around this particular trade, some disclosure issues. i've given credit, as do others at this table for jamie dime for coming out and being quite forth right on this. at one point he said this was a hedge and yet he also suggested it's more from being a hedge to a proprietary trade. how do you think of the legal ramifications first? >> i think there's a lot of unsettled factual data we need to obtain. i think jpmorgan is going to be dealing with this for quite some time to come. we don't know exactly how he's losses were incurred, who knew about them and when. and then we don't know about the disclosure decisions. once mr. dimon did make disclosure, i thought he was
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quite forth right. the question was whether he came forward early enough or whether there should have been earlier disclosures. >> you're suggesting the what happened between the tempest and the tea pot and what happened between when he was said we're assumed and he made mistakes. losing $2 billion is not an insignificant amount of money, even to a company as well financially situated as jpmorgan. >> harvey, when you were at the s.e.c., when you were looking at investigating this situation, you are looking for what and how are you doing it? >> the first thing i guess i would have wanted to have known would be to get a complete statement from jpmorgan and get it early so there could be full disclosure. what you have now is a fair amount of speculation. you've got an s.e.c. inquiry, potential fbi reviews and now
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song is going to do reviews and already i think very valuable time has been lost, and that actually works against jpmorgan and it also works against the regulator regulators. >> i thought you said they've been too open kimono. what did you mean by that? >> what i meant in my comment to andrew off camera is when you unfold the book as jpmorgan has depending on the level the market now understand, you create an environment where everybody -- people have resized the potential on the one side,
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i, as you, have been a a pro ponent of disclosure but on the other hand when you have this risk in transactions and you disclose it to the marketplace, the market is going to shoot against you. i guess i would say as usually i agree with dick. i think there's a difference between disclosing what happened here and disclosing positions and in effect worsening the position for jpmorgan. too much disclosure here in terms of specifics can undermine jpmorgan's ability to work out from the position and to contain some of the risks. and that's what i think dick grasso is referring to and i couldn't agree more. what i'm concerned about is more generic. how could this loss have occurred? when was it known? was the board of directors
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considered? when could the bank have reported these losses? those are questions that don't get to what the composition of the position is or what the specifics are in terms of how they'll be able to work their way out of it. >> harvey, my sense from sources inside jpmorgan is they would actually like to come out and tell that information as quickly as they can but that they're still rifling through e-mails, looking for all of the information. what they're worried about more than anything is saying one ning and then something else coming out after and there becomes a claim that somehow they're trying to do a cover up. >> the difficulty is in when i was there for example, when enron hit and said we can't croat -- they want to get rid of
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that overhang on the market. here is seems to meet government can help jpmorgan by saying we want you to put forth a statement telling us how you got here and we will allow to you put caveats around that so people don't read too much into it. >> harvey, assuming that there is no criminality here, and i don't know if that's the right assumption to make or not, from the s.e.c.'s perspective, is this the kind of thing where they can be fined that people in the london. >> first of all, i don't think there as a secondly, i think the
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real issues of whether the systems of internal control that were in place alerted people in time to know that they were confronting a loss of this size. those are the kinds of questions that i think the government has to get at because if this came up at the very last moment and there was no early warning, someone will go back and say you could have had a more effective system and that's where the debate will rage with the government regulators. >> terrific. harvey pitt, thank you for joining us this morning. interesting perspective on a big talker, big, interesting issue. thank you, harvey. >> when we come back, we'll have more from our guest host today, dick grasso. and coming up, words of wisdom from jim o'neill. squawk will be right back. dave, where are we on the new laptop?
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are you worried about the political back drop with the fiscal cliff? can the market get anywhere? can the economy get anywhere with this election coming in? >> i think we're starting to hear more and more that there's going to be a repeat on the annex of last year and we're going to go right to the wire. threaten default.
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clearly the republican side of the aisle is going to want some form of tax extension on the bush tax cuts. the democratic side is going to want payroll tax amended or, if you will, extended. it's not a pretty picture. what the markets hate most is this lack of clarity and i don't think you're going to get anything between now and the first tuesday in november. >> first tuesday in november. >> throw the dye in the air as to what happens. if there's a sweep of the table, the democrats are going to be in a position to hold to the bush tax cuts expirexpiring. >> sweep of the table with the democrats? >> yes. it ain't over until the polls close on election day. >> it could sweep the other way.
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>> it could sweep the other way. >> you think obama is the likely -- >> i hope it does. >> is the likely winner? >> i am a great believer that we've had a lot of debate on diversionary nonsense. the debate that should be in the american populist today at the kitchen table, are we better off than we were four years ago? is there a plan to solve these problems? >> we are losing -- i'm trying to remember axelrod's -- the republicans drove the car into the ditch, you want to give them the keys back? we were losing 750,000 jobs a month, now we're getting 200. >> he sounds like a perfect candidate for "mad men" with some of those lines he's offering. where the are solutions on debt, definite and unemployment? i haven't seen them. >> he tried with boehner to get
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to the grand bargain and once this fell through, he realized the republicans were not going to give up anything on their side and therefore he went into election mode at that point. >> let's put a pox on both sides of the aisle -- >> how do you put a pox on someone? >> you can. it's a following. >> you talk to someone? >> it's a following. if the government were a security, they couldn't get it done under sarbanes-oxley. fire both sides of the aisle and let's get people in there who are really interested in solving the problems this country has. you heard earlier in the program if there's a bright spot in global economic performance, it's right here. >> what do you think? >> i agree with him. how could you not? >> coming up, the facebook ipo somewhat disappointing after luckluster demand and trading problems at the nasdaq. how are the shares going to fare
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on day two? we're going to break down the stock with an analyst. and the market's coming off their worst trading week in a year. can stocks rebound or lywill investors continue to sell in may and go away? it's gonna be a casual thing. ♪ ♪ ♪
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the markets coming off their worst% of the year. but jim o'neill still looking for the s&p to hit 1,500 by the end of the year. >> and coming up, we'll talk to, a hot ipo that exploded when the ipo bubble burst. >> and we'll talk to patron spirits. the third hour of "squawk box" starts now. >> i'm joe kernen along with becky quick and andrew ross sorkin. our guest host, dick grasso, former chairman and ceo of the
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new york stock exchange. a solid morning shaping up. i think europe is a little bit better. we were move more solid a little earlier. i mean the actual markets. >> nothing's really happened. we just decided -- >> i love talking about, no, we don't need austerity. it's like your kid's in the hole for 50 grand on your credit card and you're telling him i got no more money, you can't spend any more money. he's going but, dad, if i can't spend any more money, it's going to mean there's going to be austerity. i need to keep spending or else i'm not going to be living well. but there's no more money, son. the ecb is not ready too open up the spigots. >> they can't open up the spigots because they can't run the printing presses like we have. >> and germany, i'm sure they'd
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like to help, the free wheeling people in greece while the germans are up there -- >> the greeks are do and there breaking plates, oompa, oompa! >> this is a referendum as to whether greece will stay in the eu. >> they didn't join! they got their pound still. they were smart enough to keep their pounds. and with one of the guys in europe called -- it's like a self-service restaurant when the uk comes over. that's how they use europe as a self-service restaurant. why are they giving advice when they -- >> i think germany was probably begging them, please step in and say something because we can't say something again. >> they have no money. it's austerity or nothing. >> we'll see how that plays out. >> another thing we've been talking about is what happened
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on friday with facebook. nasdaq says its ipo system will be redesigned. they say the stock could have a tough time if morgan stanley stops supporting the stock. and managers lower down in the ipo book could decide to get out before going underwater. >> it's 38.03 to 38.04. >> do you think it's going to break 38? >> i don't know how much money -- >> 6 cents? >> i saw 38.34 earlier. >> jpmorgan's embattled chief jamie dimon will face shareholders again today. mary is at the conference where
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dimon will be later on. i wonder what we haven't heard yet between all the reporting done last week and the wall street journal and then over the weekend, too, i know everything about ina drew that i've ever wanted to know and achilles -- i know all the lieutenants, i know who was fighting with whom and who got replaced. wow. are we going to hear more, mary? >> i don't know. that's a big question. how much do you have say? you're in the middle of the quarter, you don't want to give away too much about your position. certainly people will be listening when dimon addresses at 9:30 eastern this morning. this as jpmorgan's trading losses continue to grab headlines. the latest concerning the credentials of the former chief risk officer of the unit responsible for those losses, his name is irvin goldman. he was responsible for trading to chief risk officers at the
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cio but he had trading losses at his former employer kanter fitzgerald. losses dimon says could grow by another billion and some estimates put as high as $5 billion. the news triggering a wave of preliminary investigations. the commodity futures trading commission second to announce tomorrow it's opening an investigation into the losses. following on the heels of the s.e.c. and doj. focusing on the derivative markets and where those bad trades are located, most engineered from the london office where according to the "new york times" executive achilles mackus ran rough shod. drew won dimon's confidence after steering it through the
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uncertainty. it was then that mackris's rise, and bruno iksil. >> it will keep all our eyes. >> the other fascinating story of the morning, the headlines on the street, facebook getting ready for day two of trading on the nasdaq.
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portfolio manager darren isn't biting. you were a bit skeptical going in -- >> 37.83. >> is there a price at which you would bite? >> absolutely. we haven't yet come to a target price where we would be interested in purchasing the stock but generally speaking we like to give new issues a fair amount of time as public companies, test them out, see how well they perform in the dangerous public waters and more importantly 60% to 70% of facebook's total outstanding shares will be locked free for trading within six month. we like to wait till that period is over. usually almost always you get a much better time to purchase shares as solt me of the pressu of selling abates. >> take the trading out of it and think of the valuation on a pure sort of dcf basis -- i
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don't know how you want to value this business but how would you go about doing it? >> you do it like you do any other business. i mean, they have tremendous growth prospects, 45% year over year growth and last quarter unfortunately that's down considerably from just the previous quarter. the fact that they showed a sequential decline in revenue when google, for instance, hadn't shown a sequential decline in revenue until they were almost five times as big of a company. this is not going to be a machine-look of an operation as google was. it's going to be lumpy. the bull case for facebook is easy, it's compelling, they have unprecedented reach, they have, you know, scale in both the u.s. and countries throughout the world and more importantly they have a treasure trove of data on all of their users and soap they are able to do the holy grail of targeting on the internet, which has been pursued for a long time. >> you know, darren, we're watching the stock and it's trading below $38.
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dick grasso is our guest host today. dick, what do you make of this trading in the premarket activity? >> virtually nothing, becky. the underwriters are not going to try to stabilize in the preopening. this is basically call it the gray market. my guess is a lot of these trades wouldn't settle. they'll be broken. i think what you have to watch is the 9:30 opening on nasdaq and that's where you'll see stabilization or you won't see stabilization. >> i don't understand what you mean, they won't settle, they'll be broken? >> they'll be broken. one side will declay to the other side and they'll fight about whether that was the right price. >> so you -- okay. >> that's interesting. >> but you're saying it's 8.09 now, it's down $110. you're saying when it opens at 9:30 if it's to be stabilized at the offering price, at 38 -- >> morgan stanley will come in.
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>> it's not going open below 38. >> they're not going to stabilize premarket. >> what if they see a lot of premarket and it gets down below -- you say they're going to immediately come in at 38 and not go above that? >> if you watch the after-hours market, it's a consenting adults market, someone is right and someone is very wrong. that's true in the premarket as well. you get a quote on the s&p every morning, down 5%, up 5%. be meaning if you really want to make a mistake, i'll make you a market. >> you're saying it will not trade below 38 today? >> no, i'm saying if the underwriters, if they're going to stabilize -- >> but you can't tell from now? >> you cannot buy a signal. it's a market many firms will not allow their retail customer
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to -- >> we love exciting opens. we waited until 11:00 on friday. in is going to be another one today. >> i think they extended way too much fire power on friday to support the stock. i'd be shocked -- i think in this thing premarket trends are probably something you can count on. i can't see them committing more capital to supporting what obviously looks like a stock that wants to -- >> was that money that was thrown away then, if you closed above 38 on friday but give it up before the opening on monday, what was the point of that money being spent? >> everyone would have gone on the weekend saying the ipo broke its issue price? that's an unmitigated disaster for morgan stanley, which had a lot of control over this ipo process. >> did goldman sachs win by not being the underwriter? >> i don't think so. it was a prestigious ipo, one of the biggest hyped ipos --
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actually, i take that back. they might have won because morgan stanley is probably going to end up losing money. the fees for the ipo, which were low to begin with, were all expended on friday. >> before we get too excited, how much volume was actually expended? you probably at best traded 100,000 shares and i'm probably overstating it by ten. >> that's an excellent point, though. i'd like to know. >> the question is when morgan stanley is not in there, when you don't think they're there, that's where we're going to find out where this trades. >> why would only 100,000 shares be traded today? >> no -- >> i understand what you're saying but why only 100,000 this morning if it was so -- so many shares traded -- >> because no one really knows whether morgan stanley is going to step up this morning and bid 38, okay.
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>> darren, you think they already blew all their money on friday. >> obviously morgan stanley has a lot of fire power. >> they wouldn't go into their own money, right? it might be underwriting fee money? >> no, they would. they'd first go into the green shoe, which are shares that they have the potential to short and then buy back. so that i think -- i think they probably used it up on friday. >> there's a way to find out, isn't there? don't you know somebody? you have many friends left? >> very few. three of them are sitting here. >> darren, before you go, the other stock yahoo! is trading up in premarket action on this alibaba deal. how do you look at yahoo!? >> it's very similar. we had alibaba valued at that $35 billion level. nothing changes for us.
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we don't see that yahoo! should trade less than $20 based on the assets they have. we think the stock should trade closer to the upper teens to around 20. >> thanks so much for joining us this morning. >> it's not one of the ten most actively traded stock on the nasdaq. yahoo! is one of the most actives. >> does it have any numbers? >> the yahoo! is the issue that is most attractive. it's 485,000. nikita, there's own 9,000 shares of micron and that's the tenth most active. >> coming up a cautionary tail for facebook, co-founder of a record setting ipo when the dot-com bubble burst. we'll talk europe, emerging markets and squawk. st life insus look at you and just see a policy.
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froesing against banks and wall street. some of the people went up and rang geithner's doorbell, hoping to request a meeting. we could just call him and let him go. >> before we go to the next issue, we were talking about volume and facebook. when i look up facebook, it's now 1.9 million shares have traded already this morning. if i keep hitting refresh on this, it's 1.94 million. >> do you think all these trades are going to be decayed? >> a lot of people will be very disappointing if morgan stanley comes in and bids 38. >> premarket low is 37.0, premarket high is 38.50.
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as we've gotten a little more active, it's come down a little bit. >> joe's been pulling the stock down. >> i'm sorry you bought some on the ipo. i don't have a position here. >> nor do i. i liquidated. >> you're already out. which is true, right? >> absolutely. >> you had it on the ipo. >> it's almost at 2 million shares, every time i hit refresh. 1.9. >> you are long morgan stanley. >> are you reading my portfolio? >> markets coming off their worst week of the year. jim o'neill, chairman of goldman sachs asset management. always good to check in with you and see how you're feeling. two lousy weeks. we at one point portrayed you as less bullish. it was about a month or two ago and then you came on and sort of set us straight on that.
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i'd say you haven't changed much probably still, right? >> i shouldn't have tried to set you right. i should have let you carry on with that. >> maybe you should have. where are you today? >> i'm actually back in london after a crazy trip around your wonderful country. >> and where are you in terms of the u.s. economy, the u.s. stock market? you still think 1,500 is doable on the s&p? >> i guess it would be about five weeks back i said to you it's not entirely surprising to me we saw this almost now seemingly never ending repeat every may, but with broken -- i thought we wouldn't break the 1340 area on the s&p futures, which we did and more last week so it's got me a bit bothered. but when you look at the reasons why obviously with the remarkable saga of greece, even
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by its own standards even more remarkable, i can see why people are freaking out a bit. we had a really weak fed survey last week, which is not representative of the flavor i picked. i went boston, new york, all over california and that added some belief that the u.s. is on the mend. and yet the markets are obviously now very worried about the interconnectivity of bank lending because of the unfortunate recent episode with jpmorgan and this mess in europe. >> there is. i see a lot of people that say let greece go. but now it almost looks like both the left and the right in greece and most of the eu from germany on down, they really want to try and make this marriage -- well, it's like 19, it's more like a commune, they
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want to make this work. they really all seem to think it's really important when the prospect of a disorderly exit really came to the fore about two weeks ago. i think that really scared people. >> well, my interpretation of it over the weekend and this morning is that the fed have been trying to make sure the greek people realize what they're voting for. and by hyping and heightening the focus, the decision on june the 17th is effectively a choice -- do you want to get our support or not? whereas i think the first, you know, looking back two weeks ago, that election appears to have been a bit of a protest vote but this time around i think the greek people are being made pretty aware of what it's all about. and of course because the european policy makers cannot have any confidence about how to manage the contagious effects. they are trying to insentify
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them to vote to stay in. >> dick, do you think greece should leave? >> my sense is it would be a very important statement to the union if greece leaves that they are serious about maintaining standard and if you break those standar standards, you have to go. but i wanted to ask jim the question, jim, you're now referred to as chairman of goldman sachs asset management. put on a different hat. if you were the governor of the bank of england as many have speculated you will be one day, will greece exiting present an opportunity for the u.k. to enter? >> well, tying the two together, i think that would be unlikely, unlikely. you know, in the current situation -- >> u.k. entry or your taking on the role as the chair of the bank of england. >> the u.k. entry. >> i see, okay.
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>> good try. i think the u.k. is obviously feeling pleased that it's not part of all of this but it's not that simple as i joked with some people i met early this morning. despite this european mess, according to the official data at least, q1 eurozone gdp was better than the u.k. and that's not lost at all in the irony of that. but i think that the likelihood of the u.k. wanting to join the eu any time soon is small. what is growing in the background and i never really thought i'd hear myself have some support for this idea is will there be continued benefit of being part of the wider eu if a narrower, softer eurozone
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survives as a result of this mess. that could make life even more difficult for the u.k., despite being outside of the euro area. >> some have speculated, jim, a greece exit will send an important message to italy, portugal, the other teetering countries in the union. do you share that view? >> i like how you just described it yourself a minute ago. i think they can't keep greece in there if greece isn't going to commit to what it's given support on. it's the whole precedent of the laws of such would then just be completely broken. >> and you don't have to enforce austerity. all of a sudden you got drachmas, your buying power is cut in half. you can cry as much as you want but that's just the fact of the matter and that's what they're facing if they don't, right, jim? >> yeah. but let me throw in something
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else which in my jet lag state as i was going around the u.s. last week and i watched plenty hours of you guys and fantastic viewing it was. one thing that's not getting as much air time as it should, in some ways the policy of the french election two weeks ago, it's probably more important than the greek election. you've certainly got out of the blue germany thinking a bit more creatively and in this context big news over the weekend which i've not read on any news wire, i.g.natal just settled for a 4.3% wage increase, germany's biggest union, and that follows the prime minister saying germany should have a period of higher wage increases in order to boost their domestic demand and help the competitiveness angle from that side. it's a pretty important development. >> all right. great, jim.
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thank you. hope to see you again soon. >> coming up, the markets coming off the worst week of the year but it was facebook that stole the attention on friday. and the hot ipo that imploded when the dot-com bubble burst. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪
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welcome back to "squawk" on this monday morning. as we been discussing, facebook shares are trading below their market open. kayla tausche joins on the squawk newsline with why this is likely happening with a little more detail. >> good morning, andrew. as we've been talking with morgan stanley stabilizing those shares at the $38 support level. but the way that that works is that's pretty much an open market mechanism, similar to the way that a company can only buy back shares in the open market based on market price. so as far as what's happening right now, basically sellers lining up premarket saying if they want to get out, they don't trust in it because of the heavy
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volume that's expected at the nasdaq today they'll be able to get out at the price they'd like, which is right now obviously not optimal because it's below issue price. but any stabilization not only won't happen until the market opens but also wouldn't be advised. remember that green shoe is a little more effective once the stock breaks issue price. any bid above issue price would pull it up a little more strongly. as far as any stable says, you wouldn't get that until the open market. so we have to see whether morgan stanley has any ammunition left at this point to do that but that wouldn't happen until 9:30. >> wow. >> that's basically what dick has been saying, that we'll know at 9:30 whether they step up but we don't know at this point whether they will. you can't tell from premarket whether morgan stanley has money left, right, kayla? >> right. >> any reporting on how much they won't through on friday? >> it's unclear right now, joe.
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but if you look at the three different 30-minute periods on friday when it touched that $38 mark, the first period was right at the open and there was a sharp selloff. the second period was between 2:30 and 3:00 where it just touched for about a nano second and the third period was between 3 and 3:30 and 3:30 and 4:00 where it held at that $38 mark through that period. there were 77 million shares traded. if you think that roughly half of that would have come from morgan stanley to match the other half being market buyers, you would assume they might have about half left. it's during that last period of the day that people expect they were in there buying. we do expect they should have some left but we'll see based on where it looks like it's trading at 9:30. >> you have to wonder if the drop that we've seen this morning is accelerating concern about people who hold the stock because the volume is accelerating greatly.
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it's 2.87 million. >> now we've dropped under 37. >> it's 2.87 and there are some sellers obviously. is it even possible that morgan, knowing that there seems to be some selling pressure, how could they come in and bid 38 if the market is at -- dick, you can answer that. how can they bid 38 if the market is 37 or below? >> the premarket is 37 -- >> it basically would be a short cover at that point when you're bidding up the stock to 38. the other thing they could do, which was happening on friday is a lot of other banks -- there are 33 banks that are underwriting. they all contribute to this green shoe allotment but it's up to morgan stanley to divvy it out when it decides to stabilize. the other underwriting banks have been furiously calling other institutional investors to get them to be buyers at 38, to tell them about facebook and see if they can get any other buyers
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on board at that price, which is sort of how you make that match. >> all right. thanks, kayla. dick, you see my point. you'd have to be crazy to come in and say, all right, with the market -- you're saying the market's not there, the market's not really there. but to come in and bid 38, no one in their right mind would come in and bid 38. >> come in and bid 38 assuming the stock naturally prices considerably below that doesn't make any sense. but remember, in the opening print on friday, 85 million shares traded. so you're looking at a very small slice in the premarket. i think what morgan stanley has got to assess right now is where is the natural demand for the stock? you don't want to bid 38 and then blow your fire power and have it traded -- >> but if someone knows all this, dick, why not buy it here? why not buy some right here if -- >> not in the premarket. >> why? >> first of all, a lot of retail investors, their firms will not participate in the premarket.
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>> so if you really believe all this, it would be a nice time to buy at 36.88. >> if you believe morgan stanley is going to come in and bid -- >> if you're a retail investor who paid 40 or $42 for the stock, you're frustrated because your institution is not allowing you to trade on this and you're getting more and more nervous as you watch this happen. does that create some sort of pent-up demand that put pressure on things at the open, too? >> people get hurt in these types of markets, becky. there's no question. the stock traded as high as 45 on friday. the initial wave of reports came back a buck and a half below where the stock actually opened. i think the retail investor is smart to stay away until the market reopens. >> don't look for now.
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but in the meantime 3.1 million shares have traded. >> wow. >> we'll continue to monitor this. as we do, we're going to bring you a blast from the dot-com past. back in 1988, the dot-com -- joining us is the co-founder of the and author of the best selling book "a very public offering," steppan. what do you think as you see this play out with facebook? >> i think the stock is oversaturated, it's hyper inflated. my feeling is it was never going to pop. the likelihood of it deflit
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flaiting a fla -- deflating is really significant. i think the odds are facebook in the long run will do great but it's going to take a couple of years for it to grow into its valuation. >> you didn't sell immediately. i always wonder if you think you think you should have. if you were advising zuckerberg, who is selling some shares but to pay for taxes if i understand it correctly, what should he do? >> i put it out there i thought he should sell stock yearsing a as an insurance policy. >> he main grossed a million dollars, he's netting a few hundred million. it's a lot of money, it will let
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him live very comfortably. people need to stop looking so much of what's going on with the public stock because betting on the blapublic stock is betting a horse right before it finishes the race. it's better to look who are the next facebooks? years before going public, facebook was trading on the second market. that's one of the places you could have found real value. you're seeing companies like angel list come along, which is where the earliest new facebook are coming along. i think crowd funding and -- >> does that mean that public markets are a waste? we shouldn't focus on it, we shouldn't be in there? what you're suggesting is the opportunity doesn't exist anymore then. >> i think they're not a waste but they are representative of an old incumbent system that i think doesn't have all the flexibility and efficiency that
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companies like angel list and second market have brought along. so they're there. i after the globe experience feel strongly against companies going public. i think your stock trading and being commented on every day is a huge distraction to the ceo and makes u prone to want to take fewer risks and that's when new competitors come along. if you want to find new value, looks at companies listed on angels list and second market and look at companies that are going to disrupt industries, disrupt banks and inside step governments there a a lot of companies doing that like indy go-go and slated. >> spent my whole life going public. i think what stephan is saying, there are thousands of tame.
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if you want to bet a thousand horses and ten are wildly successful, that's one strategy. but i'll come back to disruptive business managers, the former parent of this network, jack welch, $500 billion company when he took over, 100 billion when he left. >> but that was a different time. >> everyone always says that was different. you know, after the globe there was something called v.a.linux, which had the biggest pop in history, buy all you want for under a cap of $100 million. its chairman was a guest host not too long ago. it's now called geek net. >> if you look at va linux, that was a broad based software. it was laying the piping and foundation and infrastructure for there to be an internet. the globe was an early indicator
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thatline community and the need for people to communicate with each other was going to be important. we were a little too early. facebook has come along and has fully indicated that particular business model. for me web 2.0 -- web 3.0 are business mod els that will leverage that. now what can you do with these type of session networks? for me i think -- i'm putting a lot of my own money in my angel fund money into these new disruptive models which are crowd sources of ideas, crowd funding and essentially bypassing banks, bypassing government. that's what second market, angel list, slated, indy go-go, kick started, but quite frankly, there have been a lot of billionaires coming out of that.
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people get excited. >> you got to look three, four -- a programming night for you. >> come as that's coming up at 9:30 eastern time. >> here's anyway mai question. why is it that morgue and and underwriters don't stabilize before the market? why do they not do anything before it? >> well, because it is a very, if you will, almost private type of price -- >> do we know absolutely for certain that none of it -- it was all the way down to 36.69, it's come back. none of that is the underwriter bringing it back? >> i would be shocked if morgan stanley were in that market. >> but it seems like it would make a lot more sense in this thin -- to try and do it before you have the big problem at
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9:30. if there is going to be one, i'd rather do it before hand. they really don't do that? >> i think what should have happened today is there should not have been a premarket in this stock. >> if i were morgue and -- >> i think they said morgan stanley is in the allowed to do that. they can't use the green shoe to prop that up. >> probably because -- coming up, squawk happy hours is in session. you're a at that tron. we're get the afor the tative in every way, shape, and form. it's my dream vehicle. on a day to day basis, i am not using gas. my round trip is approximately 40 miles to work. head on home, stop at the grocery store,
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>> from top shelf liquor to high-end hair products, our next guest has the pulse on consumer spending on premium brands. john paul mitchell, he's the co-founder of paul mitchell and patron liquors. >> i hear you. >> we have dick grasso here. i know he's using a lot of paul mitchell. >> i'm one of his biggest
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customers. >> on the hair? >> on the hair. >> are you using paul mitchell? >> i use the leave-in conditioner. that's good stuff. >> the leave-in. it never comes out. >> you do have the pulse of the consumer. you do sell luxury brands. in this environment we've been talking a lot about the way the economy has been going. you selling a lot of product? >> yes, we are. in fact, paul mitchell salon hair care well patron have grown quite nicely in these last three years and we're highing people also. >> and there's a reason. >> what's the reason? >> the reason is we never lost sight of the quality of our product and maintaining that real high level of quality.
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and even in tough time when people treat themselves to the high quality and they know that quality will be there, they continue on. it like getting bang for your buck. in difficult times people are used to treating them sefs in special areas, whether it's a spirit or a proper hair care so you really look good and you really feel good. we also feels salons are a barometer. when the industry went back a few years back, salons did not lose their business. they had peoplecoming every four, five or six weeks. but as the industry got better, they came back more often. >> you are a serial entrepreneur and we often talk politics on the set, what politics is doing to the economy and what it is
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doing to the entrepreneur. >> today i think politics, to disrespect, really sucks. you have people fighting each other, they forget it's "we," the people of america and i see this bickering, i see people making campaign promises and not keeping them and it's kind of sad. but i think a good part of this is a lot of america is speaking up. they're speaking up to both parties and saying, hey, instead of fighting each other, why don't you both represent us, we the people. we're supposed to be part of the government. so let's start looking at some things that are important, not just bailing out everybody but how do we get america more to work? how do we get people more into spending money? how does everyone get to share this good live together? let's work at it together as opposed to fighting each other and seeing which party comes on top. very sad when that happens. i think america is now going through a change where the people are saying i can't stand it anymore.
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if that continues, mark my word when the elections come around, people are upset, they're going to vote for a third party, i don't care who they are. they'll be a little upset with the democrats and with the republicans. >> i'm not voting for anybody right now. i'm sitting back and waiting. you know who i'm going to vote for? i said this with both parties and no one answers me. you want to be elected president of the united states? put on a piece of paper i promise i'll do this, this, this and this and if i don't do it, impeach me my first year. i promise you this, i'll be a liar like all of the other politicians that promise you things that never followthrough and if i am that way in the first year, i want you to impeach me. no one will do that. if they'll do that, we'll have some credible people in politics. >> john, thank you so much. we have to get a product for mr. grasso's hair. >> hi, dick. >> hi, john paul.
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thank you for getting up so early. my regards to that beautiful wife of yours. you've done wonderful things because your focus is always on quality and taking care of people. >> we got a product on the set and happy hour will begin at 9:00 a.m. thank you for waking up early. >> keep trying to get dick a hair product. >> ooirmt trying to. >> coming up more from our guest host -- >> he's fine with it. >> former ceo dick grasso. first we'll head to new york stock exchange with the latest buzz from wall street. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550
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let's get down to the new york stock exchange. i look back. it had been coming back. 3662 to 3665. you have it on your screens down there too, right? >> we do. >> the underwriters will come in once we open. >> how do they do that, david? if it's 36.65 it would have been good to do it earlier, wouldn't it? >> i guess. they can try to get that back up
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to 38. buy lots of stock at 39. >> they have the king's horses and the king's men. doesn't it work? >> i don't know. >> to put it back together again. >> humpty dumpty won. >> if it is 36.73 to 36.75, you can't bid 38s in there is something wrong with your -- you can't do that, can you? >> you can do anything you want in this country. it's a free country. >> how many shares now? >> is it more? >> i don't know. it was up over 3 million before. >> it is 5.3 million. >> it's 5.3 million shares. so they would start sloewly and buy it where it is here and try to get it back up.
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>> a lot of buying to do. >> i don't know about that price. 36.62 to 36.64. thank you. see you in a few minutes. when we come back, we'll get final thoughts from our guest host, dick grasso. [ male announcer ] this is genco services --
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welcome back. our guest host is dick grasso. former nyse chairman and ceo. we talked about a lot of things this morning. what we haven't touched on is what you think about post nine. that's where "squawk on the street" is. >> i absolutely love it. i think cnbc should be very proud the partnership that started with the new york stock exchange initially with maria reporting from the floor has now been expanded to a franchise really that investors every morning look to this show and to carl and the entire team, david, and it's important because what you're in the business of doing is translating something that can be very complicated. complicated for joe and look at this morning. he's tryi ining to understand t preopen on facebook. >>


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